Lloyds TSB on takeover of HBOS

HBOS confirms talks on Lloyds TSB takeover

LONDON (AP) - Embattled mortgage lender HBOS PLC confirmed Wednesday that it is in advanced talks about being taken over by Lloyds TSB PLC in what would be a further reshaping of the financial industry from the credit crisis.

The brief announcement to the London Stock Exchange gave no details, adding that the talks may not lead to an agreement.

Sky News television and the British Broadcasting Corp. reported late Thursday that a takeover deal had been worked out - but neither identified its sources.

Sky said the merger would be an all-share deal, and that a formal announcement would be made Thursday. The BBC said the deal valued HBOS at 232 pence (US$4.22) per share.

Lloyds TSB spokeswoman Beth Longcroft refused to comment on the report, saying she had nothing to add to the earlier announcement.

HBOS spokesman Mark Elliott also declined comment.

HBOS shares finished the day at 147.10 (US$2.68) pence per share, nearly 20 percent down. HBOS shares had started the year at 730.5 pence.

Lloyds shares ended the day unchanged, at 279.75 pence (US$5.09). Lloyds shares started the year at 469 pence.

The news comes after the bankruptcy of U.S. investment bank Lehman Brothers Holdings Inc., Bank of America's deal to take over Merrill Lynch, and the U.S. Federal Reserve bailout of faltering insurance giant American International Group.

Prime Minister Gordon Brown's office declined to comment on a British Broadcasting Corp. report that he had been in touch with Lloyds TSB's chairman, Sir Victor Blank, about the deal.

"The prime minister speaks to all sorts of senior businessmen and financial figures all the time,'' Brown's spokesman Michael Ellam told reporters.

"As you would expect, the Treasury, Bank of England and Financial Services Authority remain in close contact with all the major financial institutions in the U.K. and obviously the prime minister is kept informed,'' the spokesman added.

HBOS, parent company of Halifax and the Bank of Scotland, has come under pressure because of its exposure to the U.S. subprime mortgage market, raising questions about whether it can refinance its debt of more than 100 million pounds (US$180 million) in coming months
The company insists that it has no problems raising money.

The Financial Services Authority, Britain's financial regulator, weighed in Wednesday with assurances that HBOS was secure.

"Since the beginning of the current extreme difficulties in the financial markets, the Financial Services Authority has worked intensively with all major UK banks to ensure they have credible capital and liquidity plans,'' the agency said.

"We are satisfied that HBOS is a well-capitalized bank that continues to fund its business in a satisfactory way.''

Vince Cable, economy spokesman for Britain's Liberal Democrat party, accused hedge fund managers of "hunting in packs'' to undermine HBOS.

"It is shocking to see a major British bank brought to its knees by an attack by hedge fund speculators engaged in short selling,'' Cable said.

"They were only able to speculate because they knew HBOS had a government guarantee and would be bailed out by the taxpayer. If Lloyds hadn't stepped in, the government would have had to take over.''

Both Lloyds, the fifth-largest U.K. bank by market capitalization, and HBOS have seen their earnings fall from the impact of the subprime mortgage crisis in the United States.

HBOS reported a 56 percent drop in first-half net profit, down from 2.1 billion pounds (US$3.8 billion) in the first half of 2007 to 931 million pounds (US$1.67 billion) this year.

Lloyds TSB reported a 63 percent drop in first-half net profit to 576 million pounds (US$1.03 billion). Lloyds TSB is the U.K.'s third biggest home mortgage lender.

HBOS, which writes about a fifth of the home mortgages in the U.K., has 235 billion pounds (US$420 billion) in outstanding home loans.

The company also accounts for 16 percent of U.K. savings deposits.

HBOS raised 4 billion pounds (US$7.2 billion) in July through a rights issue.

Only 8 percent of its shareholders took up the offer, leaving the underwriters, Morgan Stanley and Dresdner, to find buyers for the remainder.

http://thestar.com.my/news/story.asp?file=/2008/9/18/business/20080918090437&sec=business

===

Lloyds TSB confirms US$21.85b deal to take over HBOS PLC

LONDON: Lloyds TSB PLC on Thursday announced a 12.2 billion-pound (US$21.85-billion) deal to take over struggling HBOS PLC, Britain's biggest mortgage lender.

The government said it would facilitate the deal by overriding anti-monopoly regulations.
Lloyds said each HBOS shareholder will receive 0.83 shares in Lloyds.

Existing Lloyds shareholders will hold 56 percent of the combined company.

The takeover follows days of heavy selling pressure on HBOS shares, which closed Wednesday down 20 percent at 147.10 pence (US$2.68), a fifth of their value at the start of the year. The takeover valuation is based on Lloyds' closing share price of 279.75 pence (US$5.01) on Wednesday.

Lloyds said the deal should save the combined companies 1 billion pounds (US$1.8 billion) a year by 2011, and that management's focus will be on preserving jobs in Scotland, where Lloyds is based.

John Hutton, the business and enterprise secretary, said he would present an order in Parliament to extend an exemption on public interest grounds to allow the giant combination.
The combined companies will account for more than a quarter of the U.K. mortgage market and 400 billion pounds (US$715 billion) in savings deposits. - AP

http://thestar.com.my/news/story.asp?file=/2008/9/18/business/20080918145931&sec=business